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Energy & Precious Metals - Weekly Review and Calendar Ahead

CommoditiesNov 22, 2020 07:22AM ET
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By Barani Krishnan

Investing.com - The powers-that-be in OPEC must have trouble believing their luck that oil prices can actually be rising at a time when Covid-19 cases are rampaging across the United States. 

Yet, if vaccine news is to be believed - and it must if we are to hope for some semblance of a normal life in the near future -  then the Saudi-steered cartel, as well as its allies led by Russia, should believe the day might not be very far away when we all can jump on a plane or a cruise ship again without a second thought.

While the market was willing to let hope live, the Trump administration seemed bent on destroying whatever goodwill it had built in the past four years. 

Treasury Secretary Steve Mnuchin tried to steal Christmas early by attempting to claw back from the Federal Reserve nearly half a trillion dollars which the central bank has been carefully managing to support markets and Main Street lending programs through the pandemic.

Mnuchin deferred to what he believed was Congress’s original intent when it allocated the funding, and his belief that markets now no longer needed the money — which could be redeployed as a direct stimulus instead to the people. He managed to say this with a straight face, and after browbeating Fed officials who insisted their support programs weren’t over.

The gold market, run by both humans and androids programmed to buy at any positive mention of stimulus, jumped on Mnuchin’s remarks. 

Outside of commodities, in equity trading circles especially, the disingenuity and politics aimed at making the Biden administration’s transition even harder wasn’t missed. 

Both the Dow and S&P 500 ended the week lower as markets witnessed not only Trump but also his cabinet double down on his refusal to recognize Biden’s Nov. 3 election victory and work with the President-Elect’s designated picks.

“Some parts of the country are about to see the worst (of the) Covid-19 and now seems hardly the time to remove any support programs,” Ed Moya, analyst at New York’s OANDA, said.

“The current Covid surge will trigger further economic pain for the U.S. economy and possible strains to the financial system, thus making Mnuchin’s request a Grinch-like move that just adds more uncertainty to the short-term outlook.” 

And while oil rallied a third straight week, there’s potential for those gains to unravel as real-time coronavirus infections and deaths continue to outpace vaccine development at a frightening pace — no thanks to the Trump administration’s stance since the election to only zero in on the pandemic when credit is due.

In the case of gold too, its so-called safe haven quality is only intact so long as there’s no widespread asset liquidation as witnessed in the first quarter. Prices of the yellow metal tumbled in the first two weeks of March, along with stocks, right after the U.S. Covid-19 lockdowns began. 

Energy Review

Crude prices rose for a third-straight week as investors weighed up positive Covid-19 vaccine news against the prospect of further lockdowns souring demand.  

New York-traded West Texas Intermediate, the leading indicator for U.S. crude, last traded at $42.44, after officially settling Friday’s session at $42.15, up 41 cents, or 1%, on the day. For the week, WTI rose $2.02 or 5%.

London’s Brent, the global benchmark for oil, last traded at $45.11, after officially finishing Friday’s session at $44.96, up 62 cents or 1.4%. For the week, Brent rose $2.18, or 5.1%.

The number of oil rigs operating in the US rose by fell to 231, the first decline in ten weeks, from 236 last week, according to data from energy services firm Baker Hughes.

The fall in oil rig counts, which often serve as an indicator of future production and demand, comes as oil and gas producers seek to steady output following a pandemic-fueled halt in the second quarter, when oil prices briefly turned negative.

Signs of falling activity, however, were shrugged off as investors bet that a sooner rather than later rollout of a vaccine will speed the reopening of the global economy, ushering in a wave of demand from hard-hit sectors such as air travel.

The ongoing winning streak comes just days after the Energy Information Administration reported that U.S. stockpiles of crude rose less than expected last week, though gasoline supplies jumped.

Inventories of U.S. crude rose by 800,00 barrels for the week ended Nov. 13, compared with expectations for a rise of 1.65 million barrels. Stockpiles of gasoline – one of the products that crude is refined into – rose by 2.6 million barrels, confounding expectations for a build of about 0.1 million barrels.

The weakness in fuel demand was attributed to further lockdowns in the U.S. amid soaring Covid-19 cases. Yet, some expect downside in crude prices from lockdowns will likely be temporary amid the ongoing rebalancing of demand and supply in oil markets.

"Any tactical downside in crude will likely be temporary, in our view, pushing back our $65/bbl Brent target into late 2021," Goldman Sachs (NYSE:GS) said earlier this week.  "We expect the winter Covid wave to delay, but not derail, the oil market rebalancing, with normalized OECD stocks, OPEC+ spare capacity returning to 1Q20 levels, and finally, shale production growth all occurring by 4Q21."

Energy Calendar Ahead

Monday, Nov 23

Private Cushing stockpile estimates

 Tuesday, Nov 24

American Petroleum Institute weekly report on oil stockpiles.

Wednesday, Nov 25

EIA weekly report on crude stockpiles

EIA weekly report on gasoline stockpiles

EIA weekly report on distillates inventories 

Thursday, Nov 26

Thanksgiving Holiday

Friday, Nov 20

EIA weekly report on natural gas storage

Baker Hughes weekly survey on U.S. oil rigs

Precious Metals Review

New York-traded gold for December delivery did a final trade of $1,869.75 an ounce, after settling the official session at $1,872.40, up $10.90, or 0.6%. For the week, it lost $16.45, or 0.9%. 

The spot price of gold, which reflects real-time trades in bullion, last traded at $1,871.07 on Friday, up $4.77, or 0.3%. For the week, it lost 0.9%. 

Gold edged higher on Friday after Treasury Secretary Mnuchin signalled that negotiations on stimulus measures will continue, boosting the metal’s appeal as a hedge against likely inflation.

“The thought of stimulus talks moving forward once again has supported gold as we realize central bank liquidity and fiscal stimulus measures continue to be a driving force behind this market,” said David Meger, director of metals trading at High Ridge Futures.

Earlier in the week, gold came near to testing four-month lows hit two weeks ago as investors juxtaposed news of vaccine developments for the Covid-19 and the relief those could bring with actual case raging counts of the pandemic.

Energy & Precious Metals - Weekly Review and Calendar Ahead
 

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Comments (10)
John Oakes
John Oakes Nov 22, 2020 5:51PM ET
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Propaganda, biased ********article
Adnan Ellahi
Adnan Ellahi Nov 22, 2020 2:25PM ET
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its such a nice article and full of reality and full of clearities who the fool saying it trash and still could't understand the reason for being trash ????
Barani Krishnan
Barani Krishnan Nov 22, 2020 2:25PM ET
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Thank you, Adnan. Despite some typos here and there, you make more sense than my most articulate detractors.
BOB MM
BOB MM Nov 22, 2020 2:25PM ET
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good for you, enjoy it and follow his suggestion, you'll make huge money soon
Jay West
Jay West Nov 22, 2020 12:23PM ET
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The artificial wave up in the oil sector has been abrupt. I think many missed it initially. Anyone who bought in to the hype may be disappointed soon. Very manipulated sector as many know. To top it off, G Sachs commented on it, which shows they were definitely involved with the pump. Nothing new here. With lockdowns only starting as flu season will increase covid numbers, time to buckle up. Vaccine is several months away for the masses that actually trust it. Many do not. Blue states are ramping up testing and restrictions are ramping up at an exponential pace. Regardless of political affiliation, it is clear to see that blue states are doing everything in their power to inflate their bailout package. They are using threatening language with the people as they did in April. We all know how that went. They are lazer focused on bailout money, not the well being of the people. Energy will dump. Look at the island reversal on the daily chart in the Dow. Black Monday coming 👀
Barani Krishnan
Barani Krishnan Nov 22, 2020 12:23PM ET
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Jay West, thanks for perspective on Black Monday. I do not trade, as you probably know, but agree that sans the optimism driving oil now, the vaccine promises are being taken a little too far. That said, it amuses me that no one blames the blue states for contributing to the bulk of US GDP, yet when it comes to funding them with federal dollars, Republicans will always take the higher ground in branding the Democrat-run territories as wasteful and mismanaged. The cost of doing business in New York cannot be compared to the cost of doing business in Mississippi, just so that everyone knows.
BOB MM
BOB MM Nov 22, 2020 12:23PM ET
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Enjoy the “Black Monday” dump, market will teach you what is “fair value” and “manipulation”
Carol Wessel
Carol Wessel Nov 22, 2020 10:47AM ET
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If Steve is the Grinch, and Powell is a saint, you are Pinnochio. 🤥 Obviously he wants to play Santa Baby to the poor instead of perpetuating the prop up POS market. But you have your Biden glasses on and need an eye exam.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:47AM ET
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And you keep propping Godfather Trump up with your rose-colored tints, Carol :)
Carol Wessel
Carol Wessel Nov 22, 2020 10:47AM ET
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Speaking of eyewear, Mr. Krishnan, they have a two-for one-sale at America’s Best-whom you like to call the mob boss and the Grinch.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:47AM ET
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Carol Wessel  Get your pair first. Mine are working fine :) Good day to you.
Ji Go
Ji Go Nov 22, 2020 10:33AM ET
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Been a while Mr. Krishnan. Excellent piece and original take and supporting sources, as always. Seems like you've been having to battle with triggered trolls in my absence. Apologies. My sense is that hydrocarbons are going the way of "fossils" more imminently than legacy producers are willing to admit to themselves. Do you foresee anyone else besides Shell or BP being forward thinking enough to transition to renewables or will they all keep price cutting and bickering amongst themselves past the due dates on these global green initiatives? Be safe and blessed and enjoy the holidays good friend.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:33AM ET
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Ji Go, my brother, a blast from the past! :) Thanks for the kind feedback. Much appreciated as always. Yes, it looks like Shell and BP have always been more embracing of the inevitable future than the other majors/Seven Sisters. What surprises me is how hard the Exxons of the world are fighting evolution when almost every industry has undergone disruption and the OPEC NOC-based model is as Jurassic as it can get :)
Roger Miller
Roger Miller Nov 22, 2020 10:32AM ET
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Correct me if I’m wrong but Mnuchin wants congress to reaalicate the money directly to business’ in need in the form of grants, The lending facilities the money funded has not been used, pressumably because business’ don’t want debt, and rightly so. The funding could easily be put in place again if needed. Why are so many against this?
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:32AM ET
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Roger Miller, thanks much for a sane conversation, sir. The Fed's Main Street lending program has been working, albeit slower than thought. What the economy really needs now is a broad, far-reaching and appropriately-sized stimulus. It's disingenuous for Mnuchin to try and disguise, if I may, the Trumpolitics at play here.
Gary Reguerin
Gary Reguerin Nov 22, 2020 10:06AM ET
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Good analysis. Thank you.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:06AM ET
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Thank you, Gary Reguerin.
Ken Wescott
Ken Wescott Nov 22, 2020 10:03AM ET
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Yo , Biden didn’t win , Bro . And the numbers are fake , on the covid /Biden front .
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:03AM ET
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Ken Wescott, you're absolutely right. Stormy Daniels won the election for Trump. LOL
Taylor Huddlestun
Taylor Huddlestun Nov 22, 2020 10:03AM ET
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F this trash biased article. Keep your opinion to yourself and out of economics. The money being pulled is money that HAS NOT BEEN USED. I stopped reading after the 3rd article. Clearly this author should be removed.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:03AM ET
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Continue living in your alternate reality; in fact, take that letter you started out with for your thoughts. Fed officials clearly said their programs are still on and any pullback is premature. You obviously only read trash that's good for the Trump administration.
BOB MM
BOB MM Nov 22, 2020 10:03AM ET
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Cannot agree more, this author wrote lots of trash articles here, all approved totally wrong.
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:03AM ET
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Take a token and join the alternate reality line, Bob MM.
BOB MM
BOB MM Nov 22, 2020 10:03AM ET
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Barani Krishnan   you always tell other people to be realistic, why not review the trash articles you made first? cannot understand how you can make this, where is your $35 oil and $2000 gold?
Barani Krishnan
Barani Krishnan Nov 22, 2020 10:03AM ET
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We were not in the $35 periphery right around Oct 29 through Nov 2? Are you trading on a different planet than the rest of the folk here? Gold has trended toward, even crossed, $1950 on multiple occasions since August but its inability to cross the last mile is a feature of market dislocation caused by unrealized expectations for a stimulus that Senate hawk McConnell has done an excellent job blocking. It's not just me; probably half the analyst community expected at least another round of checks to go out the past three months. That politics trumped (a fitting description) markets is a dysfunction here rather than a faulty reading of economics.
Neil Puskorius
Neil Puskorius Nov 22, 2020 9:03AM ET
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Lol your bias is showing through...
Barani Krishnan
Barani Krishnan Nov 22, 2020 9:03AM ET
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LOL, your ignorance of reality is showing also.
Matthew Pancake
Matthew Pancake Nov 22, 2020 9:03AM ET
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LOL! Biden President elect MY ****** NEVER! RESIST THE GLOBALIST DEVILS!
Barani Krishnan
Barani Krishnan Nov 22, 2020 9:03AM ET
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It tickles me to no end the number of reality-suspending readers that have crept into this site over the past four years. LOL!
 
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